A private-sector committee that advises the Internal Revenue Service branch that oversees tax-exempt organizations says the IRS is “compromising its relevancy” by failing to revise the procedures that govern audits of churches.
In a lengthy report covering many areas of tax exemption, the Advisory Committee on Tax Exempt and Government Entities (ACT) said last week that the IRS’s leadership has dropped the ball when it comes to policing houses of worship that violate federal law.
“There are several areas in which the IRS may be compromising its relevancy by not helping clarify what may be perceived as ‘institutional inconsistencies’ in enforcing the tax code; these areas cry out for leadership from the IRS,” asserts the report. “Some of these areas have been on the Priority Guidance Plan for years, such as 7611 regulations regarding churches and donor-advised funds.”
In case you’re not familiar with the backstory on this: Internal Revenue Code Section 7611 contains the rules the IRS must follow when auditing a church that is accused of partisan political activity, which is unlawful for houses of worship and other 501(c)(3) tax-exempt organizations.
The IRS must revise rules that govern church audits so it can get back to enforcing the law.
Church audits are very rare. When they do happen, they are supposed to be approved by a high-ranking IRS official. Regional commissioners were originally designated to perform this task, but that position was eliminated when the IRS reorganized in 1998. For the next decade, the agency picked a substitute official to oversee church audits, but in 2009 a federal court said the IRS had not used the “appropriate high-level Treasury official” to initiate these types of audits for years and would have to designate someone else to do so going forward.
In 2009, the IRS offered a proposal that included new protocol for investigating houses of worship. But that submission has yet to be finalized; and even so, critics have said the agency still failed to select the “appropriate” official to initiate church-tax inquiries.
To be clear: We’ve been waiting a whopping seven years for the IRS to complete these revised rules, despite claims that this revision is an agency priority.
One thing ACT failed to mention about Section 7611 is that it’s just another example of religious groups getting special privileges from the government. No other tax-exempt organizations require a high-level IRS official to approve their audits, nor are there special rules governing the audits of other types of non-profit groups.
The vast majority of religious leaders in America play by the rules and don’t jump into partisan politics by endorsing or opposing candidates. Still, there needs to be a process in place for those who do break the law.
ACT is right that the IRS is reducing its effectiveness as an oversight agency if it continues to delay making necessary changes needed to police the political activity of churches. This matter is easy to fix by assigning church audits to an appropriate high-level official. The IRS should do so.
In the meantime, Americans United will continue to monitor political activity by houses of worship and other 501(c)(3) organizations through Project Fair Play. Since 1996, we have reported more than 100 organizations to the IRS for engaging in pulpit politicking. We will continue to be diligent in monitoring this area and we will report rule breakers – and we’ll keep prodding the IRS to do its job.
You can help by signing our petition on the Projecy Fair Play site, pushing the IRS to take their enforcement of these rules seriously.